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Conference Title: IMF Headquarters Event “Fiscal Policy Options for Sustainable and Resilient Development”
Date: April 13, 2023
Organized by Commonwealth Secretariat
Location: IMF Headquarters, Washington D.C., U.S.A.
Main Participants
Prof. Etisham Ahmad LSE (former IMF Senior Advisor), Indermit Gill, World Bank Chief Economist, Vito Tanzi, former Director of the IMF Fiscal Department, Megumi Muto, JICA Senior Advisor, etc.
Background and Objectives
As one of the side events of the IMF World Bank Spring Meeting, the Commonwealth Secretariat* hosted a seminar on “Fiscal Policy Options for Sustainable and Resilient Development” (Fiscal Policy Options for Sustainable and Resilient Development). The seminar was organized by the Commonwealth Secretariat* on the theme “Fiscal Policy Options for Sustainable and Resilient Development. In this seminar, the participants discussed development finance and fiscal policy options for sustainable and resilient development, especially for Small Island Developing States (SIDS) and Least Developed Countries (LDCs), which have been more negatively impacted than others under the complex crisis. Senior Vice President Megumi Muto participated as one of the panelists.
(Note: A federation of 56 member states, almost all former territories of the British Empire, that share values such as development, democracy, and peace.
Contents
In his opening keynote speech, Prof. Etisham Ahmad, LSE (former senior advisor to the IMF), raised the issue that achieving sustainable and resilient development under complex crises requires investment decisions that take into account not only markets but also natural, human, and social capital, and income inequality, as well as that uncertainty is not considered in policy design. He also raised the issue that the conventional per capita income standard for determining access to concessional funds is not in line with actual needs, as it does not take into account uncertainty in policy design. He also pointed out the importance of effective use of development funds, especially domestic resource mobilization, in developing countries. For infrastructure development and disaster management to cope with climate change and equitable transition, he suggested that governance, including well-designed taxation and fiscal transfer rules at both the central and local levels, is important to achieve resilience at the local level, and that access to private finance and digitalization are also key.
During the panel discussion, Caribbean Development Bank (CDB) President Higgins Jean Leon explained that the common challenges faced by island countries are their susceptibility to disasters and the long recovery time required, as well as their high public debt levels, which are a drag on private investment. The report also explained that the high level of public debt is a drag on private sector investment. He stressed the need for debt relief in addition to efforts to improve the fiscal soundness of each country in order to strengthen comprehensive resilience.
World Bank Chief Economist Indermit Gill noted that the effects of redistribution through taxation are limited in low-income countries due to the large share of the informal sector in the overall economy, and that crisis response and long-term fiscal policies differ from those in developed countries, and he also noted that complex risks can have a significant impact on poverty and vulnerability. He also noted that the way in which crisis response and long-term fiscal policies are implemented differs from that of developed countries.
Vito Tanzi, former Director of the IMF’s Fiscal Affairs Department, suggested that policy makers continue to neglect addressing uncertainties such as climate change and pandemics compared to addressing risks that can be predicted based on past probabilities of occurrence, and that they tend to make mistakes such as implementing domestic policies with international public goods such as climate change in mind without considering the impact of such policies on other countries. The report also pointed out the need for a new policy framework that takes uncertainty into account.
JICA Senior Advisor Muto introduced the Philippines’ macroeconomic management and risk financing strategy for natural disasters as an example of resilience enhancement through fiscal policy. JICA has also invested in proactive disaster management through the Sendai Framework for Disaster Risk Reduction (SFDR), which is based on the Sendai Framework for Disaster Risk Reduction, by building flood infrastructure, developing river-based disaster management plans, and strengthening the capacity of local governments.
© Source JICA
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